Settling a Revocable Living Trust After Trustmaker Dies
How long does it take to distribute a trust?
A revocable living trust is a legal entity that holds a trustmaker's property so probate of that property isn't necessary when the trustmaker—sometimes called the grantor—dies. A deceased individual can't own property, so probate becomes necessary to move assets from the decedent's ownership into the names of living beneficiaries upon death.
But the revocable living trust owns the grantor's assets, and the trust doesn't die. Those assets can therefore be transferred to beneficiaries, effectively settling the trust, without involving the probate court. A "successor trustee" is named in the trust documents to take care of this process, stepping in and managing the revocable trust when the grantor dies or becomes incapacitated.
Irrevocable trusts can remain up and running indefinitely after the trustmaker dies, but most revocable trusts disperse their assets and close up shop. This can take as long as 18 months or so if real estate or other assets must be sold, but it can go on much longer. How long it takes to settle a revocable living trust can depend on numerous factors.
Where the Successor Trustee Lives
Where the successor trustee lives in relation to where the living trust is located shouldn't be a big deal with modern technology, but it can be, particularly when an attorney is assisting with settling the trust and the attorney is local.
Successor trustees who are located near their attorneys can stop by their office with questions with little notice. Quick meetings like this just can't happen when the successor trustee lives out of town or in another state. The closer the successor trustee is to the attorney and to the base of trust operations, the more quickly things will get gone.
Multiple Successor Trustees
Some grantors name two or more individuals to act as co-trustees should they die or become incapacitated. This can necessarily complicate things and result in delays, particularly when the trust's formation documents require that all trustees agree before any action can be taken.
Days or even weeks can pass while the trustees discuss, negotiate, or squabble among each other. This can particularly be the case when the grantor names two or more of his adult children as successor trustees.
The Successor Trustee Doesn't Want the Job
Grantors are encouraged to check with their potential successor trustees to make sure they're willing to take on the job, but this doesn't always happen. And even if it does, it won't prevent someone from agreeing in Year 1 when the trust documents are drawn up, then having a change of heart 25 years later.
Successor trustees can sign letters of renunciation at any time, before they take over or if they take over only to realize that the job is just too much. Responsibilities and time demands that didn't alarm them too much at age 40 might seem more quelling now that they're 65 and retired.
Some trusts name successors to their successors, but transferring authority can take just a bit of time. A beneficiary might be appointed if no other successor trustees are named and the first renounces the position, but this can cause conflict and the intervention of a court. Whenever conflict and courts are involved, time begins dragging out.
How Many Beneficiaries Are There?
Trust administration takes longer when multiple beneficiaries are involved. The distance at which they live from the attorney, the successor trustee, or both matters, too. This is simply a function of the time it takes to send documents and receive documents back from all of them.
How Often the Beneficiaries Disagree
It's highly unlikely that two beneficiaries will agree on everything, let alone three, four, or more beneficiaries. Some might even hire their own attorneys to monitor the trust administration, and these types of attorneys tend to nitpick at every single action the successor trustee takes.
Suffice it to say that the more the beneficiaries disagree, the longer settling the trust will take.
If There's a Trust Contest
A trust contest is a legal proceeding that's initiated to invalidate the terms of a revocable living trust after the trustmaker dies. Trust contests are based on one or more of four arguments:
- The trust agreement wasn't signed with the appropriate legal formalities.
- The trust agreement was procured by fraud.
- The trust agreement was procured under duress and undue influence.
- The trustmaker lacked mental capacity to make the trust agreement.
Settling the trust will continue for a long time when a trust contest is involved because any or all of these elements must be proved.
When the Trustmaker's Estate is Taxable
A taxable estate is most likely going to take longer to settle than a nontaxable one. The successor trustee won't be able to terminate the trust and make final distributions until a closing letter is received from the state Department of Revenue and/or IRS.
As a practical matter, only estates valued at more than $11.58 million are subject to the federal estate tax as of 2020, but some states have estate tax thresholds that are much lower. The waiting period for these documents can anywhere from six to eight months after filing an estate tax return with the state or the IRS.
How Complicated Are the Trust Assets?
Dealing with trust assets can be relatively simple when the trust is comprised of a house and a bank account. Add a family business into the mix and the administration of the trust can become complicated and time-consuming.
Significant and unusual assets might have to be appraised, and this can hold things up.
Settling the Trust
Settling a very simple trust should only take a month or two if everyone gets along, the trust assets aren't complicated and none have to be sold, and if the trustmaker's estate is non-taxable. Otherwise, settling a trust can drag on for a matter of years.